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Publishing: Harcourt Braces Itself

"The pressures on big publishers," says consultant Michael Shatzkin, "are such that any way they can add revenue is attractive. There is a dearth of $50 to $500 million companies. They've all been bought." Which explains why the major players are salivating over news that Harcourt General is being sold to international conglomerate Reed Elsevier for $5.6 billion: Harcourt is one of the three remaining textbook publishers, along with Houghton Mifflin and W.W. Norton, that has a consumer division, Harcourt Trade.

The hope is that the collision of Harcourt and Reed will dislodge a tasty morsel. Reed, which sold its trade publisher in the U.K. a few years ago, is an unlikely long-term parent, though Harcourt Trade publisher Dan Farley insists Reed is strategically committed to his division. Farley says he wants to grow his business but still keep it "small and focused." But his $60 million in revenue, from a frontlist of David Guterson, Umberto Eco, and three recent Nobel laureates, and a backlist of The Little Prince, Virginia Woolf, and George Orwell, is already creeping into the acquisition zone.

"There's a bit of spectator sport here," admits Farley, adding that envoys from all the major houses have "approached me to be a messenger to Reed." And Reed is returning phone calls. "The reason Harcourt is so appealing is the strength of its backlist," says HarperCollins CEO Jane Friedman, who won't say if she's made one of the calls. "Random House is interested in growing its trade business," says company spokesman Stuart Applebaum, who also won't confess to calling. "That's no secret."